vestact posted: " Market Scorecard US markets fell slightly yesterday, but World War Three was averted, which is good news. US House Speaker aunty Nancy Pelosi continued her "factory visits" in Taiwan, provoking a noisy but toothless response from China. This kind " Vestact - Money with a dash of funny
US markets fell slightly yesterday, but World War Three was averted, which is good news. US House Speaker aunty Nancy Pelosi continued her "factory visits" in Taiwan, provoking a noisy but toothless response from China. This kind of news cycle garbage is unimportant in the long term, all that matters is the individual performance of the companies you're invested in.
Speaking of which, Uber rallied 19% after the ride-hailing giant said its revenue more than doubled. Elsewhere, PayPal surged 11% after-hours following stronger-than-expected second-quarter results and an increase in its profit forecast. Finally, Starbucks rose 1.5% in late trade after a more modest beat in revenue and earnings. Oh, happy days!
With the bulk of the S&P 500 now having reported second-quarter earnings, this earnings season is ahead of Wall Street's expectations, which were low. To date, 75% of companies in the S&P 500 have beaten earnings estimates and 68% have beaten sales estimates.
Yesterday, the JSE All-share closed down 0.93%, the S&P 500 fell 0.67%, and the Nasdaq was only 0.16% lower.
Our 10c Worth
Byron's Beats
Last Thursday, Amazon released fantastic results which blew away expectations. This is what we like to see! The share price surged 10%, taking the whole Nasdaq higher on Friday. Heading into the release many analysts were worried about rising costs and slowing e-commerce sales, but Amazon managed to face these challenges very well.
Sales increased by 7% for the quarter to $121 billion. Guidance for the next quarter suggests a further 13 to 17% increase, so revenue momentum is strong. US e-commerce grew over 10% to $74.5 billion. International e-commerce sales went backwards a bit, accounting for $27 billion in sales. The remaining sales contributor is Amazon Web Services (AWS) with $19.7 billion.
As mentioned yesterday, AWS brought in all the operating income for the quarter because the e-commerce division made a loss. Some analysts seem to think AWS could be worth $1 trillion on its own. With a total market cap of $1.38 trillion, the e-commerce business looks like it's undervalued. E-commerce also includes subscription services (Amazon Prime) and the highly profitable advertising business.
The reason e-commerce is making a loss is because it is still expanding fast internationally, and building a presence from scratch is expensive. They are also rightsizing the operation after some abnormal demand during Covid lockdowns.
Amazon is a great business that has proven time and time again how well it can execute. Although the share price has recovered by 28% from its June 2022 lows, it is still 23% below its 2021 highs. We think this weakness presents investors with a very good buying opportunity.
One Thing, From Paul
We were watching Nancy Pelosi's plane fly towards Taiwan yesterday in the office. The thin-skinned communist regime in Beijing were making scary noises. US markets traded lower, then bounced higher once it became clear that the delegation had landed safely in Taipei.
I was reminded of this quote, attributed to Mark Twain: "I've lived through some terrible things in my life, some of which actually happened."
Michael's Musings
What's required to get wealthy? Working hard is important, but that doesn't guarantee that you'll rise to the top. You can't be successful without hard work, but hard work alone doesn't ensure success.
A recent study published in Nature, a top-rated journal, studied 72 million Facebook accounts to map the socioeconomic profile of their friends on the platform. This is what they found: when children of low-income parents live in places where 70% of their friends are wealthy, their predicted future earnings increase by an average of 20%.
As the saying, goes - 'it is not what you know, but who you know.'
The products that made Apple what it is today are the iPhone, iPad, MacBook, and iMac. However, we sometimes forget about the additional products that helped them become the most valuable company in the world. These include the fast-growing services business, wearables, and other accessories.
Apple recently reported its highest ever revenue figure for the second quarter, despite supply constraints caused by lockdowns in China. Apple now has an installed base of 860 million active devices and paid subscriptions across its ecosystem, and that's still growing. I can tell you now, that we are holding on to the stock in our portfolios with unwavering conviction.
The infographic below shows how big each category is under the Apple umbrella and how they grew over one year.
Asian markets have stabilised, aided by a climb in Hong Kong, as some of the anxiety over US-China tensions seems to have eased. Markets in mainland China, Japan, and South Korea are flat or only slightly lower. No cause for panic.
US equity futures are also narrowly in the green following last night's market dip. The Rand has weakened to around R16.72 against the US Dollar.
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